Question 1

Christian, a single taxpayer, acquired a rental house in 2002. The rental house, which Christian actively manages, generated a $15,000 loss in 2015. In addition, Christian owns a limited partnership interest which he acquired in 2007. His share of the partnership loss for 2015 is $10,000. Christian has modified adjusted gross income, before the rental loss and partnership loss, of $134,000.
​
What is the amount of these losses that Christian may deduct in 2015?

Accepted Answer

The answer of Christian, a single taxpayer, acquired a rental...

Question 2

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

Accepted Answer

A) True 
 B)False

Question 3

Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan?

Accepted Answer

A) The taxpayer must instruct the trustee of the retirement plan to transfer assets to the trustee of another plan. 
B) No withholding is required. 
C) In one year, there is no limit to the number of times a taxpayer can request a distribution rollover from one IRA to another IRA. 
D) Assuming there are no unusual events, the taxpayer has a maximum of 60 days in which to transfer funds to a new plan to avoid current taxes and penalties. 
E) All of the above are true.

Question 4

Dividend income is considered "passive income."

Accepted Answer

A) True 
 B)False

Question 5

Carey, a single taxpayer, purchased a rental house in 2015, which he actively manages. During 2015, Carey had a loss of $14,000 from the rental house. If Carey's adjusted gross income for 2015 is $138,000 before the rental loss, what is the amount of Carey's allowable deduction for the rental activity for 2015?

Accepted Answer

A) $0 
B) $3,000 
C) $6,000 
D) $12,000 
E) None of the above

Question 6

Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

Accepted Answer

A) True 
 B)False

Question 7

Selma owns a beach cottage that she rents to tourists. In 2015 she rented the cottage for 180 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?​

Accepted Answer

A) ​0 days 
B) ​9 days 
C) ​14 days 
D) ​18 days

Question 8

Unreimbursed qualifying moving expenses are an itemized deduction for 2015.

Accepted Answer

A) True 
 B)False

Question 9

Which of the following is not deductible as a moving expense?

Accepted Answer

A) The cost of moving household goods 
B) Lodging for household members during the move 
C) The cost of a pre-move house-hunting trip 
D) Travel expenses during the move 
E) All of the above are deductible as moving expenses

Question 10

Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

Accepted Answer

A) True 
 B)False

Question 11

In order for a pension plan to be considered a "qualified" retirement plan, the plan must satisfy certain minimum vesting requirements.

Accepted Answer

A) True 
 B)False

Question 12

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2015, assuming they earn $85,000 in total and are not participants in pension plans?

Accepted Answer

The answer of What is the maximum amount a 55-year-old...

Question 13

Under a defined contribution plan, the contribution made on behalf of the employee is determined using a formula dependent on the employee's current compensation.

Accepted Answer

A) True 
 B)False

Question 14

If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

Accepted Answer

A) True 
 B)False

Question 15

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA?

Accepted Answer

A) $550 
B) $610 
C) $1,220 
D) $3,000 
E) $5,500

Question 16

Jody is a physician (not covered by a retirement plan) with a salary of $40,000 from the hospital where she is employed. She supports her husband, Andre, who sells art work and has no earned income. Both are in their twenties. What is the maximum total amount that Jody and Andre may contribute to their IRAs and deduct for the 2015 tax year?

Accepted Answer

A) $5,500 
B) $5,000 
C) $11,000 
D) $10,000 
E) None of the above

Question 17

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2015. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

Accepted Answer

A) $20,500 
B) $15,000 
C) $19,000 
D) $25,000 
E) None of the above

Question 18

For the current year, Robert, a single taxpayer, earned wages of $235,000 from Big Shot Corporation. He also received interest income of $1,000 from Little Credit Union. Robert had a $9,000 loss from his rental property which he actively manages. $2,000 of income was also reported on his Schedule K-1 from ABC Limited Partnership. Neither the rental property nor the partnership investment has passive losses carried over from prior years. Since Robert is not an active participant in a retirement plan, he decides to contribute $5,500 to his IRA.
a.Calculate Robert's adjusted gross income using the above information.
b.How much is Robert's unallowed loss from his passive investments?
c.What happens to the unallowed passive loss?
d.Calculate Robert's adjusted gross income assuming his wages were only $35,000.

Accepted Answer

The answer of For the current year, Robert, a single...

Question 19

Arnold purchased two rental properties 6 years ago. He actively participates in their management. During 2015, Arnold had income of $22,000 from one of the rentals. He had a loss from the other rental of $32,000, as well as salary income of $35,000, and dividend income of $2,000. What is Arnold's net passive income or loss deduction?

Accepted Answer

A) $8,000 net loss 
B) $10,000 net loss 
C) $22,000 net loss 
D) $32,000 net loss 
E) None of the above

Question 20

Jim lives in California. What is Jim's deadline for making a contribution to traditional IRA or a Roth IRA for 2015?

Accepted Answer

A) April 15, 2015 
B) December 31, 2015 
C) April 18, 2016 
D) October 15, 2016

Exam 4: Business Income and Expenses, Part II

Subject to the annual dollar limitation and the earned income limitation, deductible IRA contributions are allowed for all taxpayers who do not participate in a qualified retirement plan.

Which of the following statements is true of a distribution rollover (not a trustee-to-trustee transfer) from a retirement plan?

Dividend income is considered "passive income."

Earnings on nondeductible IRA contributions are allowed to accumulate tax-free until they are withdrawn.

Selma owns a beach cottage that she rents to tourists. In 2015 she rented the cottage for 180 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?​

Unreimbursed qualifying moving expenses are an itemized deduction for 2015.

Which of the following is not deductible as a moving expense?

Net losses on the rental of vacation homes are limited to 15 percent of total gross income.

In order for a pension plan to be considered a "qualified" retirement plan, the plan must satisfy certain minimum vesting requirements.

What is the maximum amount a 55-year-old taxpayer and a 48-year-old spouse can put into a Traditional or Roth IRA for 2015, assuming they earn $85,000 in total and are not participants in pension plans?

Under a defined contribution plan, the contribution made on behalf of the employee is determined using a formula dependent on the employee's current compensation.

If a Section 401(k) plan allows an employee to choose between a direct payment of compensation in cash or a contribution to the retirement plan, the plan is not a "qualified" plan.

Donald, a 40-year-old married taxpayer, has a salary of $55,000 and interest income of $6,000. He is an active participant in his employer's pension plan. What is the maximum amount Donald can contribute to a Roth IRA?

Polly, age 45, participates in her employer's Section 401(k) plan which allows employees to contribute up to 15 percent of their salary. Her annual salary is $100,000 in 2015. What is the maximum she can contribute to this plan on a tax-deferred basis under a salary reduction agreement?

Jim lives in California. What is Jim's deadline for making a contribution to traditional IRA or a Roth IRA for 2015?

Selma owns a beach cottage that she rents to tourists. In 2015 she rented the cottage for 180 days. What is the maximum number of days Selma can use the cottage before her expense deduction will be limited to her gross rental income?